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By the end of the 2010s, adoption of digital fintech was relatively slow but steady, if a bit apprehensive. Credit union constraints and doubts remained common and unsure whether to view the emerging industry as friend or foe, supportive partner or upstart competition. 

Well, many of those worries have largely evaporated by early 2023 due to the difference they made when members needed them most during the pandemic. For those who experienced heightened financial distress and waited weeks for stimulus payments to arrive, mobile access to affordable small-dollar loans like those provided by QCash became a lifeline for both credit unions and their members in weathering the worst economic effects. 

In fact, at the outset of the pandemic in March 2020, already 32 percent of families who employed small-dollar loans used them for unexpected expenses, and another 32 percent used them for temporary income shortfalls. Once again, when a national crisis (or in this case, worldwide crisis) was at our doorstep, the credit union difference was there for members. 

The best starting point for partnering with a fintech CUSO provider is to discuss the potential partnership with your staff and membership while addressing their return questions and comments. Oftentimes, the fear, apprehension, and “unknown” of the experience is not the partnership itself. It’s the foreboding uncertainty of what it entails to onboard the platform itself. 

A benefit of automated fintech is the opportunity for staff to save valuable time they can dedicate to other administrative duties that can bring further revenue to the cooperative. Not only that, fintech allows the credit union to enter regions and markets where they don’t have a physical branch – banking deserts, for instance – where they can do the most good for underserved communities lacking proper financial inclusion. 

Credit Union Constraints
Photo: Damir Mijalovic | Unsplash

Addressing credit unions’ constraints to fintech implementation

More and more industry executives and credit unions are beginning to realize fintech has become a vital component to the long-term health of the cooperative movement rather than framing them as a credit union constraint or threat. The level of capability, refinement, and ease around digital banking has fundamentally changed the way financial institutions operate. That’s what fintech CUSOs like QCash do; they optimize credit unions and allow them the capability to offer preeminent, best-of-class banking experiences for their members. 

A perceived loss of connection to members

Uncertainty still factors in, however, when fintech partnership is discussed. A common credit union constraint is that staff may have reservations about a perceived loss of connection to their members. They’re afraid that if members aren’t showing their faces in their lobbies, they’re at risk of losing them. In reality, that perspective needs to be updated to realize the consequences if they do not, in fact, see the future ahead through digital transformation.

According to Forbes, the majority of Americans are, in fact, on board with digital banking. As of 2022, 78 percent of adults in the United States prefer to bank through a mobile app or website. Being on the frontline of contemporary digital access and functionality in all areas of commerce is a new feature of excellence, and the credit union movement is in existential need of understanding this new reality. 

It’s not to say that business can’t or won’t need to be conducted in person! There are many aspects of the financial service experience that members require face-to-face interaction. That will never change. 

But Americans’ daily lives are increasingly on-the-move, and they require the assets to function in that new world. And the financial services industry appears to agree. A survey by Cornerstone Advisors earlier this year still found that seven out of 10 financial institutions agreed that fintech partnerships are important to their future as a way to improve their operations. 

The process of updating your credit union core

Another common issue concerns the technology credit unions currently have that support their core system. Prior to the pandemic, a number of credit unions’ cores may not have been up-to-date at the time, and it’s past time they made that move. 

In a joint Credit Union Times and Filene research report released in 2019, they described how a “21st century credit union” will, in part, be a service provider of “concierge banking”; that being a credit union of the future will not simply be a deposit source or lender. They will serve as financial advisor, wealth manager, and safety net, automating tasks that otherwise drain the life out of members while nurturing them through the choices and decisions that determine a financially healthy and stable life. 

Except such features won’t be available without the integration of a core platform that can implement various types of data from diverse sources. As members already expect more personalized relationships with their credit unions, the connection with credit unions and their cores is also evolving. The cores that are to come will be multi-layered data management systems, not simply systems of record.

When it comes to the onboarding process, the fintech will partner with someone on-site to perform the implementation. If the cooperative doesn’t have a staff member on-site to perform the implementation, third-party contractors or cooperatives with similar cores are available. The staff member will be guided through the process so they learn the details, tools, and best practices to complete the implementation. In the end, the staffer often realizes the onboarding was easier than expected! 

Data Security

Consumers have increasingly been using third-party financial apps on their mobile devices, placing valuable trust in those mobile commerce companies to keep their data security at peak efficiency. In fact, six in 10 consumers look to mainstream financial institutions to help educate them about how financial applications access and use member data. 

This puts credit unions in a great position to offer both education and solutions that give members more trust in their cooperative’s personal data protections. Traditional, mainstream financial institutions still maintain some advantages that have helped keep them in the fintech arena. Their status as trusted stewards of member assets, both data and money, remains their most potent weapon in their branding and operational toolkits.